Month: May 2022

It’s been a volatile and exciting trading week due to options expiration (OPEX). 

This week’s price action captures what we can expect during OPEX and volatile times. The market has seen chops, pops, and a big drop.

After the S&P 500 (/ES) dropped near $3,855 on Wednesday, the question now is if we see another significant move on Friday.

For the market to pop, the /ES has to break through the $3,900 and $3,928 range. Then we could see a push to the $3,980 to $4,000 zone.

If the /ES rejects the zone from $3,900 to $3,928, we’ll look for the market to retest the low from last week at $3,855. Below this level, the market could fall to $3,843.

Remember the importance of liquidity and major zones. Trading zone to zone can be especially useful during a volatile OPEX week.

In the video above, we’ll review the price action and zones of the major indexes and the SHOP setup we’re keeping an eye on.

Stay Focused!

This week we are anticipating options expiration (OPEX) on Friday, May 20. 

Big money likes to take advantage of options expiration to cause chop and keep price near liquidity. This week, keep this in mind to either stay out of trouble or take advantage of this event.

It’s important to be aware of OPEX as it ties in with trading around liquidity. 

The point of control (POC) for the S&P 500 (/ES) dropped to $4,013.50. On Monday, /ES spent most of the day trading around this POC level.

On Tuesday, we have two catalysts that could impact the market. First, we’ll have a member from the Federal Reserve speak at 8:00 a.m. Eastern. At 8:30 a.m. Eastern, retail sales from April will be reported.

In the video above, we’ll lay out potential scenarios we could see this week with OPEX and lay out our next liquidity targets and key zones.

Here is our focused list:

SHOP — If SHOP pops and fails at $383, we’ll target $355 to POC at $340. If it pops and breaks through $383, we could see SHOP hit POC at $401 and reach the $430 to $440 range.

ROKU — As long as ROKU is below the $103 to $98 zone, look for a drop to $88.50 and $83. If ROKU holds $92, it could pop to the mean at $98.

Stay Focused!

Will the market get a continuation of Friday’s strength?

This move would be ideal for us to short the bounce as we want to enter our short positions at the 21 exponential moving average (EMA). 

The S&P 500 (SPX) has a weekly squeeze that hasn’t fired short. This weekly squeeze has the potential for 5 to 8+ weeks of downside momentum.

In the Sunday watchlist video above, we’ll lay out where we’ll look to short the move on SPX and review names with similar squeezes on TSLA, AAPL, AMZN, and GOOGL.

Stay Focused!

After relentless selling all week, the markets finally rallied on Friday, setting the stage for a short squeeze next week.

The indices and many leading names reached deeply oversold levels on Thursday. While that is the moment in time when things feel as bearish as possible, it’s typically not the best time to get short. Getting short “in the hole” puts a trader in the position to fall victim to the oversold bounce, just like we saw on Friday.

The ideal time to short is on the bounces into falling 21 exponential moving averages (EMA). Should Friday’s strength continue into next week, that’s exactly what we’ll be looking to do. While there are a lot of bearish setups on our watchlist, we’ll likely focus on the S&P 500 (SPX) for our next bearish positions.

Looking at the weekly chart of the SPX above, notice that it is setting up in a bearish squeeze under the 21 EMA. Remember the rule of thumb with squeezes: once a squeeze fires, the move tends to last for 5 to 8+ bars. 

Given that this is a weekly squeeze, there’s the potential for 5 to 8+ weeks of momentum to the downside. We aren’t just seeing this setup in the SPX. TSLA, AAPL, AMZN, and GOOGL all have similar squeezes.

Because of these weekly structures, we want to short the next bounce toward the daily 21 EMA. Shorting into the strength will offer the best risk-reward on debit spreads or credit spreads. This will allow us to catch the “meat of the move”.

Keep a close eye on things next week, and be ready to consider getting short positions working should the SPX rally into the $4,150 to $4,200 range.

Stay Focused!

The S&P 500 (/ES) continued to drop lower on Thursday. The /ES opened below the weekly Ichimoku Cloud for the first time since COVID in 2020.

Although the market is extended to the downside, this doesn’t mean price will head toward liquidity. Instead, we want to focus on the next pop setting up for a better short opportunity. 

Pay close attention to the $3,900 range. If the /ES breaks through this range to $4,000, we could see it head toward $4,029 and $4,055. If the /ES fails at $3900, it could roll over to $3,840 and $3,800 next.

In the video above, we’ll lay out key zones on the major indices, the volatility index (VIX), and names on our watchlist like SHOP, GOOGL, and AAPL. We’ll use these inflection points as our compass heading into Friday. 

We’ll see you tomorrow morning for live premarket prep on the Focused Trades Youtube before we look to take action in the Simpler Day Trading room together.

Stay Focused!